Adjusting Your Finances When You Become Part of a Couple

Many changes occur when you’re ready to move from single life to marriage, and some of the most important of these changes involve finances. While as a single person you are, for the most part, free to spend your money as you wish, you’ll likely have to make some accommodations to your spending habits when you become part of an integrated couple. In addition to your income and expenses, the changing role of taxes in your life may need to be considered, along with the spending habits of your partner. As a couple, bad spending habits can eventually find their way back to your credit score and cause damage.

Allocation of IncomeAs a couple, you’ll have to decide how you’re going to share — or not share — your income. Some couples simply lump all their money together into a single communal account, while others keep the individual incomes separated. Another option for couples is to fund a joint account that can be used for paying bills and monthly expenses while keeping separate accounts for individual expenditures. No matter what you choose, you’ll have to discuss what is best for you as a couple and set up your accounts accordingly. If you’re a married couple, your state might make the allocation of income decision for you. In the nine community property states — California, Arizona, Louisiana, Texas, Idaho, New Mexico, Wisconsin, Washington and Nevada, generally, all income that a married couple earns is considered equally shared by both, regardless of how it is titled.

BudgetingAs a single person, you might not have been too concerned with creating a budget. With only one income, keeping track of your inflows and outflows can sometimes be as simple as looking at your bank account. As a couple, however, you might find that budgeting makes things easier to track, particularly if you are earning two incomes and keeping them separate. As a couple, you may face additional expense categories that you hadn’t even considered as a single person, such as the medical or charitable expenses of your partner. Having a planned budget can help you allocate your joint income appropriately and give you a concrete picture as to whether the amounts available for certain categories — such as the discretionary income you may have enjoyed while single — will rise or fall. It’s also important to remember that while your finances might be merging, you credit information will not. There are no joint credit reports—even for married couples—and your credit is still assessed on an individual basis.

TaxesDepending on your income as a couple, you may find that your tax rate will rise or fall from when you were single. The so-called “marriage penalty” may arise when two high-income earners file a joint tax return. At certain income levels, you may get taxed at a higher rate than you would have as an individual.

Beneficiary DesignationsIf you’re a married couple in a community property state, such as California, you’ll have to name your spouse as your beneficiary unless you get written permission from your spouse to the contrary. However, to ensure that your money ends up in your partner’s hands, particularly if you are not married, you may wish to make arrangements to specify your intentions in writing in proper legal format.

Joining your finances as a couple is, in many ways, one of the most important steps you can make to merge your interests and experiences with your significant other. It’s the little things you do together that make a perfectly imperfect relationship—saving for your first family home, starting to fund a college education for now-little ones, or even beginning to plan for the golden years of retirement—that can end up being the big things to make a life together memorable and worthwhile.

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